Buy rating on Sun Pharma, target Rs 980: Motilal Oswal

SummarySun Pharma’s FY14 annual report provides good visibility on the key pillars of growth which includes enhancing its pipeline of complex/specialty products for the US and successfully turning around Ranbaxy’s operations.

Sun Pharma’s FY14 annual report provides good visibility on the key pillars of growth which includes enhancing its pipeline of complex/specialty products for the US and successfully turning around Ranbaxy’s operations.

Future focus will be on building a differentiated product basket, foraying into products that yield stable and consistent cash flows. At the same time, the company continues to be on the lookout for value enhancing inorganic opportunities in the US.

The India subsidiary created last year (Sun Pharma Global) has shown a PBT of Rs 340 crore versus a negative PBT of Rs 130 crore in FY13.

URL Pharma did sales of Rs 1760 crore with PAT of Rs 600 crore (margins of ~30). A significant part of URL Pharma performance in FY14 was driven by favourable pricing for key products and re-launch of some of the discontinued products from URL’s portfolio. Recently, prices of some of these products have normalised significantly and hence a part of URL Pharma’s performance may not be sustainable in our view.